STOCKHOLM BERLIN Infineon, a maker of chips, lifted its full-year profit margin forecast on Thursday after reporting better than expected margins in the first quarter, as strong demand from carmakers led to higher prices.
Shares of the German company, which gets 45 percent of its business from automakers, went up 7 per cent.
Carmakers have been buying chips to shore up inventories after a global chip shortage in the last two years has hampered production, which has benefited companies such as Infineon.
Demand for mobiles and personal computers is expected to fall this year after gaining significant market value in the initial pandemic years. Chipmakers like Intel, which depend on consumer electronics, have forecast a weak year ahead.
Automakers have stepped up buying to fill in the gap left by slowing demand from PC and mobile makers.
The sales of new cars in Europe are expected to increase by 5 per cent to 9.8 million vehicles this year, despite greater economic uncertainty.
Infineon's rival, STMicroelectronics, forecast an upbeat year, citing strong demand from automotive and industrial customers.
Infineon's quarterly adjusted, or segment margin rose to 28 per cent from 25.5 per cent in the previous quarter, beating expectations of 24.7 per cent. The company raised its full-year segment margin forecast to 25 per cent from 24 per cent.
It maintained its full-year revenue outlook of around 15.5 billion euro, plus or minus 500 million euro, despite a less favorable exchange rate.
Investments for the full year are expected to be around 3 billion euros, according to the company, which is looking for acquisitions to boost growth.
Some analysts have warned that demand from the auto industry may weaken as economic headwinds increase.
Jefferies analyst Janardan Menon said that the strength in automotive chips is unsustainable in an environment of weaker car demand and rising inventories, with order and revenue trends likely to weaken once the chips come out of shortage.